LECTURE 4
ROLE OF ENTREPRENUER IN AN ECONOMY
Entrepreneurs initiate and sustain the process of economic development in the following ways:
1. Capital Formation:
Entrepreneurs mobilize the idle savings of the public through the issues of industrial securities. Investment of public savings in industry results in productive utilization of national resources. Rate of capital formation increases which is essential for rapid economic growth. Thus, an entrepreneur is the creator of wealth.
2. Improvement in Per Capita Income:
Entrepreneurs locate and exploit opportunities. They convert the latent and idle resources like land, labour and capital into national income and wealth in the form of goods and services. They help to increase net national product and per capita income in the country, which are important yardsticks for measuring economic growth.
3. Generation of Employment:
Entrepreneurs generate employment both directly and indirectly. Directly, self-employment as an entrepreneur offers the best way for independent and honorable life. Indirectly, by setting up large and small scale business units they offer jobs to millions. Thus, entrepreneurship helps to reduce the unemployment problem in the country.
4. Balanced Regional Development:
Entrepreneurs in the public and private sectors help to remove regional disparities in economic development. They set up industries in backward areas to avail various concessions and subsidies offered by the central and state governments.
Public sector steel plants and private sector industries by Modis, Tatas, Birlas and others have put the hitherto unknown places on the international map.
5. Improvement in Living Standards:
Entrepreneurs set up industries which remove scarcity of essential commodities and introduce new products. Production of goods on mass scale and manufacture of handicrafts, etc., in the small scale sector help to improve the standards of life of a common man. These offer goods at lower costs and increase variety in consumption.
6. Economic Independence:
Entrepreneurship is essential for national self-reliance. Industrialists help to manufacture indigenous substitutes of hitherto imported products thereby reducing dependence on foreign countries. Businessmen also export goods and services on a large scale and thereby earn the scarce foreign exchange for the country.
Such import substitution and export promotion help to ensure the economic independence of the country without which political independence has little meaning.
7. Backward and Forward Linkages:
An entrepreneur initiates change which has a chain reaction. Setting up of an enterprise has several backward and forward linkages. For example- the establishment of a steel plant generates several ancillary units and expands the demand for iron ore, coal, etc.
These are backward linkages. By increasing the supply of steel, the plant facilitates the growth of machine building, tube making, utensil manufacturing and such other units.
Entrepreneurs create an atmosphere of enthusiasm and convey a sense of purpose. They give an organization its momentum. Entrepreneurial behavior is critical to the long term vitality of every economy. The practice of entrepreneurship is as important to established firms as it is to new ones.
THE ENTREPRENEURIAL PROCESS
Entrepreneurial process can be defined as the steps taken in order to establish a new enterprise. It is a step-by-step method, one has to follow to set up an enterprise.
There are mainly five steps one needs to follow. These steps are −
· Preliminary steps
· Decision-making steps
· Planning steps
· Implementation steps
· Managerial steps
1. Preliminary steps are the initial steps one has to follow for establishing a firm. At this stage, the to-be entrepreneur should be able to make a decision that is going to affect the company.
We can say that an entrepreneur is born at this stage. An entrepreneur searches for business opportunity and collects information/data from all sources available.
2. Decision-making Steps
Decision-making steps can be defined as those steps or say the lessons learnt by an entrepreneur to make decisions efficiently.
In this step, the entrepreneur is seen consulting with DIC (District Industrial Centre) and MSME (Medium Small & Micro Enterprise). Some of the decisions to be taken are −
- Decision of acquiring fund from banks or financial institutions.
- Acquisition of permission, recognition, application.
- Making of PPR (Preliminary Project Report).
- Decision regarding land, building, plant, machinery, labor, raw material, fuel, energy, water supply, filtration, etc.
- In order to make effective decisions that is adaptable and comfortable for the company, the clients and all those who are directly or indirectly linked to the decision-making step play a very vital role.
3. Planning Steps
Planning is an assumption or prediction of business requirements and outcome in the future. It provides a space to review the best strategy to run the business by cutting expenses and maximizing profit.
Some of the planning steps include −
· Planning for infrastructure like plant and building.
· Getting permission and recognition from the government or any other reputed authority.
· Applying for environmental clearance.
· Purchasing of land and licensing of mines, if necessary.
· Applying for electric connection and water supply.
· Planning the final feasibility, technical feasibility, and operational feasibility.
· Study of PPR and preparation of Detailed Project Report (DPR).
· Getting loan and/or capital investment.
· Acquisition of machineries and planning for installation.
Now, let us move forward to see how this planning step is further transformed to implementation steps.
4. Implementation Steps
Implementation is the execution of plan; it is the action taken to implement the plan so that something actual happens.
Given below are some steps that will help us get a clear picture of how actions in planning steps are groomed into implementation steps −
Acquisition of land, setting up building, and purchasing raw materials.
Installation of plant and machineries, and arranging human resource.
Receiving permission and reorganization letter, and receiving capital investment.
Starting operation and production.
Arranging fuel, electricity, and water supply.
Making infrastructural development, i.e. road, hospital, school, residence, etc.
Implementation is the most important and difficult step, during implementation the actuals come to figure and something of real value is generated.
5. Managerial Steps
We have seen about the roles and duties of an entrepreneur. Managerial duties are also very important for an entrepreneur as well as the organization. Some of the managerial duties to be taken care of are −
- Preparing market policy and strategy.
- Managing promotion of product or services.
- Formulating pricing policy.
- Managing wholesalers and retailers.
- Deciding the profit margin.
- Managing marketing strategy, managing advertisement of product or service, managing distribution system for efficient distribution.
- Warehouse management.
- Each step has its own importance and its own role in the development as well as deterioration of a company.
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